As emerging technologies seek to shake up existing financial service offerings, companies face the same challenge with regulators as they do customers – educating them as to the nature of their product and convincing them of its security and viability.
The challenge for Fintech companies is that, given the innovative technologies being employed in a sector that has been built on a stagnant, aged infrastructure, financial services regulators can be unfamiliar with many of the new underlying technologies being introduced by firms looking to disrupt.
Coupled with the fact that such technologies are rarely fully formed when first introduced to a marketplace, it can be exceptionally time consuming for new entrants to the industry to secure approval from the relevant regulators.
This is particularly true of the US, where the sheer multitude of regulators required to sign off on such products – there are 11 different federal regulatory bodies, plus each individual state will also have its own regulator – can result in considerable legal and time costs for firms just to be authorised to bring a product to market.
This goes some way towards explaining why the UK remains such a draw for emerging Fintech companies, with 16 Fintech companies having set up headquarters or European headquarters in London since January 2015.
With a single financial services regulator (the Financial Conduct Authority – FCA) having been formed in 2013 to replace the former regulator (the Financial Standards Authority), the regulatory climate in the UK is significantly easier to negotiate.
With events such as London Fintech Week and London Blockchain Week demonstrating the sector’s undoubted importance to the UK economy, a strong relationship and continued dialogue between the UK regulator and the community seems assured, to the benefit of all in the Fintech ecosystem.
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